Eircom to IPO on stock exchanges next month

26 Feb 2004

Valentia has confirmed that it is to re-float Eircom on the Dublin and London Stock Exchanges in the first half of March. Valentia said it intends to raise around €300m in gross proceeds through a primary offer of shares and will change its name to Eircom Group plc.

The news follows approval earlier this week from more than 50pc of bondholders for the €3bn to €4bn flotation of the company on the back of a dividends incentive offer from Valentia, offering payment of as much as €20 for every €1,000 worth of bonds held.

According to an Eircom statement this morning, Citigroup, Deutsche Bank, Goldman Sachs International and Morgan Stanley have been appointed as Joint Bookrunners to the offer, with Goldman Sachs International and Morgan Stanley also acting as Joint Sponsors.

As well as the €300m that Valentia hopes to make from the primary offer of shares, it is understood that the offering will include a substantial secondary offer of existing ordinary shares. Valentia said that the proceeds of the primary offer will be primarily used to repay a portion of the existing indebtedness or used for general corporate purposes.

Valentia said that in the nine-month period ended 31 December 2003, Eircom, the operating entity of Valentia, had consolidated turnover of €1.2bn and EBITDA of €450m, with cashflows associated with capital expenditure of €150m. As of 31 December 2003, net debt at Valentia Telecommunications, the immediate subsidiary of Valentia, was €2.1bn.

Valentia is 70pc owned by Tony O’Reilly, Providence Equity Partners and George Soros. Commenting on the flotation decision, the chairman of Valentia Tony O’Reilly said: “I am very pleased that since the Valentia takeover of Eircom in 2001 we have substantially completed our objective, which was to turn around the performance of the business. The company is now focused on its core business of fixed line telecommunications, it is more efficient and it is delivering a lower cost and higher quality service to its customers. As a result, Eircom can now be returned to the market as a plc with long-term institutional shareholders.”

Eircom’s chief executive officer Dr Philip Nolan commented: “We are delighted that Eircom is returning to the market. Since Valentia took ownership we have focused on our core fixed-line telecommunications business, exited non-core businesses, reduced costs and made broadband available in Ireland. We believe there remains scope for further efficiency gains over the years ahead and this, together with our position in the Irish market, our strong brand and the potential for broadband services, gives confidence that we will be able to serve the interests of customers and shareholders alike.”

In its announcement, Eircom revealed that it will be reducing headcount from the present 8,191 employees to around 7,000 in agreement with the respective trade unions.

Quoting quarterly data from ComReg, Eircom said that it has a market share of 80pc of the Irish fixed line market, based on turnover, with some 2m fixed line telephone access channels in service. Of these, 1.6m were basic public switched telephone network (PSTN) lines and the remaining 400,000 were more advanced ISDN channels.

In terms of broadband rollout, Eircom revealed a near-term ambition to have 100,000 broadband connections rolled out by December this year. It claimed that approximately 1m phone lines are connected to DSL-enabled exchanges, representing over 60pc of Eircom’s telephone lines. As an internet service provider (ISP), Eircom had approximately 500,000 subscribers at the end of last year.